Is Fidelity’s Health Care ETF A Good Buy Right Now?

Core Viewpoint - Healthcare investing offers defensive characteristics during market turbulence, but regulatory uncertainty and political risk can lead to sudden selloffs [1] Group 1: Fund Overview - Fidelity MSCI Health Care Index ETF (FHLC) tracks the MSCI USA IMI Health Care Index, providing exposure to U.S. healthcare companies across various sectors [2] - The fund has an expense ratio of 0.084%, which is lower than many competitors, while maintaining over 80 holdings [2] - FHLC's return is driven by capital appreciation from underlying stock holdings and modest dividend income from mature healthcare companies [2] Group 2: Concentration Risk - Eli Lilly (NYSE:LLY) constitutes over 13% of FHLC's portfolio, linking the fund's performance closely to GLP-1 obesity drugs [3] - The stock of Eli Lilly has surged 46% over the past year and is trading near its 52-week high [3] - The top five holdings also include UnitedHealth (NYSE:UNH), Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK), and AbbVie (NYSE:ABBV) [3] Group 3: Performance Analysis - FHLC has gained 5.3% over the past month and 17.9% over the past year, outperforming the S&P 500 in both periods [4] - However, over five years, FHLC returned 42.6% compared to the S&P 500's 84.5%, and over ten years, the gap widens to 154% versus 235% [4] - This long-term underperformance is attributed to challenges in the healthcare sector, including drug pricing pressures and slower innovation cycles [5] Group 4: Future Considerations - Recent momentum in FHLC suggests potential sector rotation, but buying after outperformance carries inherent risks [5] - Enhanced ACA premium tax credits have an 87.5% probability of expiring by January 31, 2026 [6]